Teina Pora has been awarded $2,520,949.42 compensation and received a Government apology for being wrongfully convicted of rape and murder.
The entire Crown case against Mr Pora has been rejected by a retired High Court judge contracted to review the case by the Government.
Mr Pora spent 21 years in prison for the rape and murder of Susan Burdett.
Justice Minister Amy Adams made the announcement this afternoon.
Rodney Hansen, QC, said he could have found Mr Pora innocent on a higher standard than on the balance of probabilities - the test to trigger a Government payment for a wrongful conviction.
Justice Hansen was appointed last year to review the case after the Privy Council quashed Mr Pora's convictions and directed that he not be tried again for the 1992 crimes.
In his report, Justice Hansen said: "Indeed the state of the evidence is such that, in my view, he could have proved his innocence to an even higher level."
Justice Hansen has concluded that convicted serial rapist Malcolm Rewa acted alone and was solely responsible for the crimes.
Ms Adams said she had written to Mr Pora to acknowledge his innocence and "unreservedly" apologise to him for the "devastating impact" the wrongful conviction and imprisonment had on him.
• Read: Justice Minister's apology letter to Teina Pora
At a press conference this afternoon, Ms Adams read out her apology letter to Mr Pora at his request.
"I am very happy to do so," she said.
She accepted that some people felt that the payout to Mr Pora should have been higher, saying that there were "a range of views" on the final figure.
The minister said she was open to the reviewing the Cabinet guidelines for awarding compensation.
"That's a decision we can certainly have. But the reality is that that would never have affected Mr Pora's application because his application will be dealt with on the guidelines at the time.
"You can't move the goalposts halfway through the process."
Rewa was convicted of sex attacks on 25 women including the rape of Ms Burdett. But two juries couldn't agree whether he murdered her.
After the second hung jury, the Solicitor-General stayed a third prosecution. Rewa will be eligible for parole in 2018.
Mr Pora's lawyer's say they had hoped he would be offered more than $2.5million in compensation.
Speaking this afternoon in Herne Bay, Jonathan Krebs and Ingrid Squire told media they had asked for up to $8 million in compensation from the Crown for the 21 years Mr Pora spent wrongfully imprisoned for a rape and murder he did not commit.
Mr Krebs said they had hoped allowances would have been made according to the Consumer Price Index increases.
They would have been satisfied with an offer of $4 million or more.
"The amount of $100,000 per annum that has been talked about a lot over the last 24 hours ... has been in place for about 16 years."
Mr Krebs said the spending power of $100,000 was significantly less now than it had been when first used as a starting point for compensation.
"We are disappointed with the quantum. We sought a considerable amount more than has been offered so it is natural we would feel some sense of disappointment and I want to make that clear that's our feeling."
Ms Squire said Mr Pora had been aware of the offer for about 24 hours and that for the moment it was just that - an offer he could accept or reject.
While she and Mr Kreb expressed disappointment with the $2.5 million offer, she pointed out that for Teina this was more money than he ever would have dreamed of having in his life.
"He needs an opportunity now to reflect on it and we need an opportunity to further discuss with him what that money looks like in real terms and that's a process that will take some time for Teina.
"He has some idea what he would like to do with the money and we've had discussions about that for some time in the event he was successful in his claim for compensation.
"The reality is it's a mindboggling figure ... particularly for Teina."
Justice Hansen was critical of aspects of the Crown case and police procedure and of the meddling role played by some of Mr Pora's extended family.
The case against Mr Pora relied upon his confession which the Crown said broadly conformed to the forensic evidence, showed knowledge indicating he was likely present and was supported by the evidence of other witnesses.
"That is not the view I take," Justice Hansen said. Pora's confession was "a transparent concoction" which "against the odds" persuaded police that he was present.
Mr Pora had not divulged anything he could only have known by being there and made mistakes in his interview that he would not have made had he been present, Justice Hansen said.
"All the indicators are that he made it up as he went along. Lured by the prospect of a reward, lulled by the belief that the consequences for him would not be drastic and with his judgment and his thinking befuddled by FASD (Fetal Alcohol Spectrum Disorder), Mr Pora set out to persuade the Police that he was there.
Justice Hansen's key findings in establishing Mr Pora's innocence were:
• Mr Pora's confessions to Police, affected by his foetal alcohol spectrum disorder, were a clear fabrication and cannot be relied upon.
• In particular, Mr Pora did not disclose anything to Police that he could have known only had he been present at the attack on Ms Burdett
• Evidence said to corroborate Mr Pora's confession was unreliable as it came from family members who had already concluded that he was guilty
• Evidence relied on to show an association between Mr Pora and Rewa was also unreliable.
• Mr Hansen said the undisputed evidence lead to the "irresistible inference" that Rewa acted alone in the sexual violation and murder of Ms Burdett and that there was no credible evidence he was accompanied by Mr Pora.
• Read: Compensation reports for Minister of Justice by Hon Rodney Hansen CNZM QC
"Against the odds he succeeded by using knowledge he already had, information unwittingly fed to him by his interrogators and with the help of family members who had already formed the view that he was guilty ... His account is so plainly a fabrication that it collapses under its own weight."
Most of the 'independent' evidence said to corroborate the confession came from family members who had already decided Mr Pora "did it" and the 'assistance' they gave to the Crown case, including highly persuasive evidence purporting to link Mr Pora to the crime scene, had its origins in that mind-set, the judge said.
Subsequent events had vindicated the judgement of Detective Sergeant Karl Wright St Clair "that family members conspired to incriminate Mr Pora".
Evidence from some family members was also among that relied on to show an association between Mr Pora and Rewa. Justice Hansen found that evidence was similarly suspect.
"I find the undisputed evidence leads to the irresistible inference that Malcolm Rewa acted alone and was soley responsible for the rape and murder of Ms Burdett. There is no credible evidence to show that he was accompanied by Mr Pora."
Mr Pora did not name Rewa - even when to do so would have likely resulted in his early release from prison - "because he did not know who he was".
"He did not know who the rapist was because he was not present when Ms Burdett was raped and murdered."
Justice Hansen's report showed that $1.9m of the compensation was for loss of liberty, $225,000 was for non-pecuniary losses, and $334,000 was for loss of livelihood, potential earnings and legal fees.
The minister was also asked how the Government could prevent similar miscarriages of justice.
She said Mr Hansen had found some shortcomings in the police's handling of the case, but also that the responsibility for the case "could not be laid solely at the door of police".
Neither court heard the crucial evidence which eventually led to his innocence, she said - the finding that Mr Pora had foetal alcohol spectrum disorder and that this affected his confession.
"What it tells us is that at the time Mr Pora was prosecuted and convicted ... the system simply didn't know as much about foetal alcohol spectrum disorder as it now does."
This could not be regarded as a failing, she said, but simply as a "tragic" matter for Mr Pora.
• Read: Timeline - Teina Pora case
Police apologise to Teina Pora
Acting Police Commissioner Glenn Dunbier this afternoon apologised to Mr Pora for the "deficiencies" found in the original police investigation, saying that it was conducted in good faith.
"Police accept Mr Hansen's view that Mr Pora's version of events regarding the rape and murder of Susan Burdett made in his confessions cannot stand up to critical scrutiny," he said.
"Police also acknowledge that there were deficiencies in the original investigation as identified by Mr Hansen, and we apologise to Mr Pora for this."
Foetal alcohol spectrum disorder (FASD) was a poorly-understood condition at the time, Mr Dunbier said, and its relevance to criminal investigations was not fully recognised.
Citing the Privy Council, ruling the acting commissioner reiterated that police officers did not put pressure on Mr Pora.
He also went further, saying that "if anything", police officers were "fastidiously correct in their treatment of him".
Mr Dunbier said police had made significant changes to their investigation methods since Mr Pora's conviction.
Ardern: "We need a safety valve"
Labour's justice spokeswoman Jacinda Ardern said the case underlined the need for changes in the justice sector, both to prevent further miscarriages of justice and also to ensure there is a "safety valve" when such miscarriages occur.
That meant making sure police were better equipped to deal with mental disabilities and the way that they affected confessions, she said.
Mr Pora's case also underlined the need for an independent criminal case review commission, as is used in the United Kingdom.
"The minister says this case proves that our system works," Ms Ardern said.
"We believe it proves that there are failures and we need a safety valve."
An independent commission would have allowed earlier and faster access to the appeals process, she said, and would not have relied on thousands of hours of legal work by volunteers.
At her press conference today, Ms Adams reiterated that the Government was not interested in creating a commission for wrongful convictions.
Ms Ardern also said that Mr Pora's compensation payment should have been adjusted for inflation.
There was nothing in the Cabinet guidelines to prevent this from happening, she said.